Build-A-Bear Workshop narrows its loss in Q2, plans new stores
While Build-A-Bear Workshop continues to navigate amid declining store traffic, the company continues to open new stores.
The specialty retailer will return to Manhattan this fall, opening a location next to the Empire State Building. The new store, which is near where Build-A-Bear previously operated a temporary location, is expected to draw from both the local shoppers and tourists that frequent the area.
However, it is the chain’s smaller format concourse locations that are paying off in a challenging retail environment. Called concourse shops, these smaller stores require less capital, shorter term leases and, at approximately 200 sq. ft., they are driving “higher sales per square foot than at traditional mall stores,” Build-A-Bear CEO Sharon Price John said in an earnings call with analysts Thursday.
Despite these gains, the company had a net loss of $1.5 million, or $0.10 per share for the second quarter ended July 1. This was compared to a net loss of $4.3 million, or $0.28 per share, in the fiscal 2016 second quarter. The adjusted net loss was $2.3 million, or $0.15 per share, compared to an adjusted net loss of $3.7 million, or $0.24 per share, in the fiscal 2016 second quarter.
Total revenues were $77.2 million, an increase of 2.8%, compared to $75.1 million in the fiscal 2016 second quarter. Consolidated comparable sales declined 0.9%. This included a 1.5% decrease in North America, and a 2.2% increase in Europe. Consolidated comparable e-commerce sales increased 13.3%, following an 11.7% increase in the fiscal 2016 second quarter.
During the second quarter, the company opened 23 new stores, closed six locations and remodeled or reformatted 16 stores. The company also added 17 concourse locations in the second quarter. As of July 1, the company operated 353 company-owned stores — including 93 Discovery format stores — with 293 locations in North America, 59 in Europe and 1 in China. The company’s international franchisees ended the period with 88 stores in 11 countries.
“We are pleased to report top line growth as well as expansion in merchandise margin and gross profit margin enabling us to narrow the pre-tax loss in this year’s second quarter,” Price John said.
“While we had a marginal decline in consolidated comparable sales, primarily due to continuing retail traffic challenges, this was more than offset through the successful implementation of our diversification strategies, including the positive impact of the opening of more productive Discovery format stores and a new, innovative concourse shop model, as well as revenue from alternative sources, including experiential wholesale, international franchising and outbound licensing,” she added. “We expect the continued disciplined execution of our stated strategies to move us toward our long term goal of sustainable profitable growth.”
Mall owners take pay cuts
Macerich CEO Arthur Coppola had the potential for total compensation worth about $12 million in 2016, but his company’s recent proxy filing showed him receiving less than half of that.
Coppola is just one of many senior executives of publicly traded mall-owning companies to feel the sting brick-and-mortar’s right-sizing in his pocketbook, according to a report in the Wall Street Journal.
Simon Properties CEO David Simon received stock valued at $9.5 million from 2013 to 2015, but received no distribution last year due to the elimination of the company’s stock-grant program. Poor performance of GGP stock left chief executive Sandeep Mathrani’s paycheck a million bucks lighter.
The REIT is the reason. The real estate investment trust industry is ahead of most other industrial sectors in aligning executive pay plans to the interests of shareholders, according to Jeremy Banoff, senior managing director at compensation consultant FPL Associates.
“The rest of the world is playing catch-up,” Banoff told the Journal.
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New life for struggling Bay Area mall
A 40-year-old mall in San Francisco’s East Bay that was put on the auction block has been snatched up by a partnership that pledges to revitalize the “irreplaceable” property.
New owners LGB Real Estate Companies and Aviva Investors see a successful, mixed-use future for the 1.1 million-sq.-ft. retail center.
In a press release LBG stated it would take advantage of Hilltop’s location to build more than 9.600 housing units, office space, and hotels and revitalize the site’s viability to support retail, dining and entertainment.
Situated 20 miles northeast of San Francisco and 25 miles south of Napa in Richmond, the 77-acre site has its own exit off of Interstate 80 and offers views of San Francisco Bay.
“The Hilltop District has the potential to become the premier East Bay residential, mixed-use, walkable community of the future,” said Doug Beiswenger, managing partner in charge of entitlements and construction for LBG.
Vacancy rates have shot up at Hilltop Mall in recent years. Original anchor J.C. Penney is closing this month. LBG has in mind a retail rebranding and renovation that will include significant upgrades to the building exterior, interior common areas, and signage.
“The surrounding neighborhood has great growth opportunities that contribute to a strong value-proposition,” said Russ Bates, head of the Americas for Aviva Investors’ Global Indirect Real Estate Group.
C-III Asset Management handled the transaction as special servicer for a CMBS securitization. The purchase price was not disclosed.